Federal Labor looks to gas, and so does AGL

September 21st, 2017

Federal Opposition leader Bill Shorten has increased pressure on Victorian Labor with a strong endorsement for natural gas as a key element in solving eastern Australia’s power problems.

“I think part of the solution for energy prices is to increase the supply of gas in Australia,” Mr Shorten said today.

This followed an earlier salvo against the Victorian Government ban on gas development, as we noted  last week.

In addition to spotlighting his own State, Victoria, Mr Shorten urged the leaders of NSW and Northern Territory governments to review their policy obstacles to development of natural gas.

“It’s not just about Victoria, it’s about the Northern Territory, seeing if it’s possible for them to extract more natural gas out of the Beetaloo Basin,” Mr Shorten said.

“It’s about the New South Wales Premier, Premier Berejiklian, making sure that she doesn’t have unreasonable moratoriums on the supply and exploration of conventional gas, and clearly that goes for Victoria as well, as I have said previously.”

His comments came as gas producer and major electricity generator/retailer AGL identified natural gas as a key element of its plan to gradually transition away from coal-fired power.

The statements by Mr Shorten and AGL are both important and politically significant. What they demonstrate is that it is largely green politics which is preventing the moves needed to bring down the retail price of East Coast gas and electricity.

The AGL statement exposes the confected belief that the baseload power loss caused by the future  closure of the Liddell power station in NSW could be replaced solely by a wind or solar energy development in its place.

AGL’s Chief Economist, Tim Nelson, acknowledged as much in his presentation to the media at a tour of the ageing Liddell power station.

“Repowering” with a gas-fired plant at Liddell was definitely an option, he said.

And the formal presentation by the company continued on the same theme.

In  a slide headed “Dispatchable and flexible”, the AGL presentation said: “Not all dispatchable plant is also flexible.”

Dispatchable power is power which can be sent when required, on demand.

Renewable energy does not meet this definition. Coal-fired power is dispatchable in that it can be increased on demand (assuming a plant is not already operating at capacity). However it needs to be run constantly – it is not flexible, to be turned on and off according to demand, as a gas plant can be.

This is why the AGL presentation also says:

“In the medium-term, an ‘optimal plant mix’ is likely to transition to gas-fired peaking units and demand response”.

Gas generators can provide the triple play to complement renewables: Dispatachable, flexible and with drastically reduced emissions (compared to coal-fired power).

Demand response means encouraging power customers to adjust their use to avoid system overload, and resultant blackouts.  That does not equal certainty for businesses or the East Coast’s  five million gas customers consumers.

The ability of gas-fired generators to provide the flexibility and lower carbon emissions (compared to coal-fired power) is what lead to gas being identified as an ideal ‘transition fuel’ to complement the uptake of intermittent renewable energy.

South Australia has learned – the hard way – that this is true. After establishing the highest penetration of renewables anywhere in Australia (42 per cent), it has turned to gas to restore stability, following the unprecedented whole-of-state blackout a year ago.

In the meantime, it has had to use high-emission diesel generators to plug the power supply gap.

Business/political commentator Peter Van Onselen put it simply in The Australian:

“Renewables advocates simply cry foul about the environmental impact of coal, ignoring the extent of global use and the reality that diesel (which is worse) is going to be used in South Australia this summer because renewables can’t do the job.”

Mr Van Onselen and Mr Shorten are right. We need more gas to restore stability and put downward pressure on prices.

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